Bumi Stake Sale May Hinder Rothschild Bid to Have Board Replaced

Bumi Plc was founded in 2010 when Nathaniel Rothschild, co-founder of Bumi, and the Bakries bundled stakes in two Indonesian coal companies -- Bumi Resources and PT Berau Coal Energy -- in a $3 billion deal. Photographer: Jason Alden/Bloomberg

Feb. 19 (Bloomberg) -- Nathaniel Rothschild’s bid to gain
control of Bumi Plc, the coal venture at the center of his
dispute with Indonesia’s Bakrie Group, may struggle to win
support after a major holder sold a 13 percent stake.

Rosan Roeslani, an associate of the Bakries, sold about
24.2 million shares of the London-listed company to three
separate investors, according to a statement yesterday. The sale
increases the amount of votes Rothschild will need to win at the
Feb. 21 shareholder vote on his plan to oust most of the board.
The voting rights associated with those shares had previously
been excluded by a U.K. Takeover Panel ruling.

The development came as a commissioner at the OJK --
Indonesia’s financial services regulator -- said Bumi may be
required to make a takeover of its Indonesian unit PT Bumi
Resources should Rothschild succeed in removing the board.

“As of yesterday, the voting outcome of these new buyers
is still unclear,” Alexander Ramlie, a director of Bumi Plc,
said today in an e-mail. “The results of the shareholder votes
would probably be very tight for either side.”

Bumi Plc was founded in 2010 when Rothschild and the
Bakries bundled stakes in two Indonesian coal companies -- Bumi
Resources and PT Berau Coal Energy -- in a $3 billion deal. Both
parties have made proposals to shareholders that would separate
the Bakries from Bumi Plc, a move the board is also pursuing.

Shares Gain

Bumi advanced 0.5 percent to 396 pence by the close in
London. The stock, which slumped 69 percent in 2012, has
rebounded 43 percent this year. Bumi Resources rose 7.5 percent
to 1,000 rupiah in Jakarta, the highest close in six months.

The Takeover Panel ruled in December that the Bakrie Group
and Roeslani’s PT Bukit Mutiara, which together controlled 50.3
percent of the voting rights in Bumi Plc, are regarded as
“acting in concert.” They must reduce those rights to less
than 30 percent by disposing of shares, it said. The panel has
rejected an appeal against its concert-party ruling, it said in
a statement today.

The buyers of the 13.4 percent in Bumi held by Roeslani’s
Recapital Group -- Avenue Asia Capital Management LP, Argyle
Street Management Ltd. and Flaming Luck Investments Ltd. -- will
be free to vote at the meeting, according to a statement from
Recapital that cited the panel. That will increase the number of
votes Rothschild must win to succeed in ousting the board.

Avenue Capital Group declined to comment on the purchase
and the Tanoesoedibjo family-controlled Flaming Luck couldn’t be
reached for comment.

Standard Life

Recapital’s 24.2 million shares had a market value of 91.3
million pounds ($141 million), based on the Feb. 15 closing
price, according to Bloomberg calculations.

Standard Life Investments, which holds about 2.2 percent of
Bumi Plc, said today it would vote against all of Rothschild’s
resolutions.

“The restructured Bumi Plc board has the best prospect of
exiting the Bakrie relationship and maximizing long-term value
for the remaining shareholders,” London-based Head of Equities
and Executive Director David Cumming said in a statement.

“We have made clear to Bumi the importance we attach to
the successful restructuring of its board and the strengthening
of its executive team,” Cumming said. “These are prerequisites
for restoring confidence and delivering the returns shareholders
expect.”

Rothschild said today the outcome of the Feb. 21 meeting
would depend on the U.K. Takeover Panel’s “decision to admit
new shareholders at the 11th hour.” Rothschild and Standard
Life “agree on many things,” the financier said in an e-mailed
statement. “We both agree that this board and the existing
management team needs to be restructured.”

Regulator’s View

Should Rothschild’s bid to remove 12 of Bumi Plc’s 14 board
directors succeed and be deemed to constitute a change of
control at Bumi Resources, it would trigger a mandatory offer
for the remainder of Bumi Resources’ shares, the OJK’s Nurhaida,
who goes by only one name, said yesterday in Jakarta. Bumi
Resources is 29 percent-owned by Bumi Plc.

“In the event of a change of control, the capital market
regulations are clear,” she said. “The new controlling party
must conduct a tender offer.” Nurhaida didn’t say whether board
changes at Bumi would constitute a change of control.

Rothschild said today in a separate statement that votes in
favor of his resolutions on Feb. 21 wouldn’t constitute a change
in control, with shareholdings before and after the meeting
substantially the same.

“Bumi Plc has never had ‘control’ over Bumi Resources,”
he said. “There has never been any agreement or legal transfer
of control rights to Bumi Plc.”

The OJK’s Nurhaida said control is defined as an ownership
in excess of 50 percent, or having the ability to control
certain aspects of the company such as appointing directors or
management, even with a stake of less than 50 percent.